2010.07-Working Paper-Development Partnerships for Growth and Poverty Reduction

　　Development Partnerships for Growth and Poverty Reduction

　　Table of Summary

　　Executive Summary

1. Introduction: Development as a Process of Learning and Transformation

2  .Development partnership and China's growth and poverty reduction

2. 1 China's home-grown strategies

2. 2 Partnerships as sources of capital and knowledge

2. 3 Key elements in China's management of partnerships

2. 4 Lessons that are most relevant to Africa

3. Development partnership in Africa’s growth and poverty reduction

3. 1 What partnerships have worked in Africa

3. 2 China s strategies in development cooperation in Africa

3. 3 Perspectives from Africans and from Donors

4. Policy Options

　　Box1.Volume and distribution of foreign and in China

　　Box2.China’s development cooperation with Africa: ODA and OOF

　　Annex 1

　　Figure 1. China’s poverty reduction as compared to other developing countries

　　Figure 2. China’s transformation form an agrarian economy to a largely industrialized economy

　　Figure 3. China's institutional transformation: form home-grown second- best ones to modern institutions

　　Figure 4. Total Amount of ODA provided by OECD-DAC countries to Africa

　　Development Partnerships for Growth and Poverty Reduction

　　As awareness has increased of the importance of development partnerships for improving the effectiveness of aid, interest has also increased in knowing more about the experience and lessons learnt from the partnerships that China has developed with its Donors. An issue of particular interest is how China has been able to absorb external support and advice without losing independence in selecting its unique development path. Another issue is how international support has been integrated socially, culturally and politically into China's internal agenda. These are critical issues for African countries that depend heavily on international assistance.

　　Despite significant differences in ethnicity geography, socio-economic and geo-political conditions at present China and Africa bear some resemblances historically. In 1978 when it started its reforms, China was a low-income country with agriculture as its largest sector accounting for 71% 0f total employment. Now after 30 years of leaning and transformation, China has grown to be the largest exporter of labor-intensive manufactured goods, showing that development is achievable. This provides an inspiring example for African countries.

　　Looking back over 30 years of development in China and in African countries, participants at an event on

　　Development Partnerships for Growth and Poverty Reduction agreed that China’s development experience is credible and there is much to learn  though an approach based on learning, selective adaption and innovation.

　　Three lessons from China’s-experience can be highlighted for African countries:

1. China’s approach is an ownership modal where a country and people take development in their own hands and control the development agenda. China has a “developmental state” where political leaders and the government put top priority on economic development, and implement what was promised. Internal accountability systems help ensures that the government delivers results. The rapid and broad-based growth witnessed in China was mostly internally driven. International development partners and foreign investors helped to accelerate this process by sharing knowledge, approaches, skills and experience.

2. China’s approach is also a learning and innovation model. China adopted a home-driven, pragmatic approach based on learning by doing and mal and error. Following the logic of learning, China started with easy reforms and then moved to more complex ones.

　　Identifying various growth bottlenecks along the way, successful experiences were scaled up while unsuccessful pilots were abandoned. Development partners were crucial in supporting China's leaning and transformation process.

3. China’s development path is unique, but its sequencing may hold lessons for others. Reforms started with agriculture and village enterprises and then moved on to labor-intensive light manufacturing and exports. Progressive opening up to trade and foreign investment allowed China to build on its comparative advantage at each stage of is development. However, China’s development process is still not complete and the country now needs to rebalance its growth, shifting from relying on exports to expanding domestic consumption and people-centered, harmonious and sustainable growth.                                    

　　China’s deepening economic engagement in Africa was generally welcomed by many African participants at the Development Partnerships event. They noted that China’s approach to aid trade and investment was helping to promote growth and reduce poverty in Africa. However, China could probably do a better job in learning from its own rich experience in managing development partnerships to inform its engagement in African countries.  

　　It is in everyone’s interest to improve the effectiveness of aid and avoid repeating past mistakes. Current reforms embodied in the in Paris Declaration and the Accra Agenda Action aim to improve aid effectiveness, including by improving co ordination and increasing transparency. There is a potential complementarily between established donors “software” and China’s “hardware”, a potential win-win-win solution activities and reform multilateral aid institutions to welcome by the international community and demonstrate China’s readiness to be a responsible global partner. 

　　A partnership requires an open mind to new thinking and alternative approaches. Established donors can learn form China and vice versa. For example, the proliferation of parallel Project Implementation Units has   undermined national public administrative systems in many parts of Africa, a practice that was never allowed to    develop in China in terms of speed and efficiency of project implementation, and effective integration of aid, trade and investment. For its part, China can strengthen its monitoring and evaluation and impact assessment to facilitate learning from past successes and failures. The relationship between conditionality and country ownership merits greater reflection.

　　For African countries to be more fully in the driver’s seat, as China was a higher level of ownership and accountability is needed. To achieve this, Africans need to develop their human and institutional capacities to define, lead and implement their own development process. In addition, so that. African countries can more effectively take control of their development path and guide donors; it would be helpful if they had more complete information. About levels and conditions of China’s development cooperation and the terms of the various government-backed commercial deals that Chinese and Other multinational companies are entering into in African counties.

　　Increased economic integration is also important for promoting development on the African continent. Greater leadership could help African countries to flesh out a regional strategy on infrastructure development that wound better utilize the opportunities that China and established donors can provide.

　　People living in hunger cannot afford to suffer the consequences of ineffective aid. Concerted actions globally are needed to meat the huge challenges of promoting growth and reducing poverty and hunger, challenges made more difficult by issues associated with climate change and pandemics. The lesson from China’s development experience is that Africa’s own talented people can do more to take their destiny in their own hands .The international community and ownership of the development process. The result would be stronger development partnerships for growth and poverty reduction and a more peaceful and prosperous world.

1. Introduction: Development as a Process of Learning and Transformation

　　As is well recognized, development is a process that is full of uncertainties and even more so is the process of transition. Because of this uncertainty, development itself should be pursued through an approach based on learning, selective adaptation and innovation. When China started the reform 30 years ago it faced tremendous uncertainty, there was no blueprint. No one knew the specific path to the “end model”. No one had expected that in the three decades following the initiation of pro-market reforms in 1978. China has sparked and maintained a rapid economic growth and achieved the most rapid poverty reduction in human history. Using the new international poverty line of $1.25/day (in 2005 PPP), it is estimated that in the 24 years after 1981 over 517 million people in China were lifted out of poverty and the proportion of the population living in poverty fell from 84% to16% (Chen and Ravallion 2008).(Figure 1 in Annex 1)

　　Thirty years ago, China was a low-income country with agriculture as its largest sector accounting for 71% of total employment. Similar to many African countries, China was relatively abundant in terms of natural resources and unskilled labour and was lacking human and physical capital. To earn foreign exchange China had to export raw material such as crude coal, crude oil, minerals and agricultural products. As late as 1985, crude oil accounted for 20 percent of total exports. In 30 years, China has nearly accomplished at least three significant transformations, in particular. a) a transformation from a planned economy to a market economy; b) a transformation from an agrarian society to an industrialized society, and c) a transformation from a closed economy to a largely open economy integrated with the world. This historical transformation can be relected in the following figure on the employment structure sectors. (Figure 2 in Annex 1)

　　China's achievements in promoting rapid economic growth, reducing poverty and coping with this crisis have naturally drawn attention from the international community. Although China's reform is largely initially driven, development partners have played catalyst roles in the achievements. In addition, China has recently enhanced its development cooperation with developing countries, particularly with African countries as reflected by rapidly rising trade and investment flows as well as expanding development cooperation activities. It is broadly recognized that China's engagement can contribute to creating new opportunities in Africa for growth and poverty reduction and provides Africans with new sources of ideas and investments. To maximize these opportunities and take the lessons from this process, it would be useful to share experiences on different types of development partnership being pursued by various stakeholders: African countries, established donors and emerging economies. All parties involved in supporting Africa's development can benefit from learning from each other's experiences, and benefit from forming a closer co-operative structure with the common objective of working to achieve the Millennium Development Goals (MDGs).

　　In this broad context, the first event of the China-DAC Study Group on “Development Partnerships for Growth and Poverty Reduction” was timely. Due to space limit, this synthesis report is not intended to be comprehensive but focuses on three key issues that were discussed at the first event:

1. What strategies and approaches have allowed China to achieve rapid growth and poverty reduction, and how has China learned from development co-operation and utilized it to promote this growth and poverty reduction? To what extent are these experiences and lessons relevant to Africa7 (Section 2)

2. What types of development partnerships have worked in Africa? What partnership approaches have been used by emerging donors such as China? (Section 3)

3. How can Africa, China and established donors work together build development partnerships in Africa? (Section 4)

　　II. Development partnerships and China's growth and poverty reduction

2. 1 China's Home-grown Strategies for Broad-based Growth and Poverty Reduction

　　China's reform agenda was generated internally by the strong desire to catch up and reach the development goals set forth by Deng Xiaoping. Due to path-dependence, China's objective was to build a-socialist market economy with Chinese characteristics" through an experimental approach. This independence in ideology has established China's leading role and deciding voice in its own development agenda. As a transition economy faced with tremendous uncertainty, China has developed its own unique path for the transformation from a planned economy to a market-oriented economy where poor people have been able to participate in, contribute to and benefit from growth. Although the "end model" may be similar to a market economy, from the Chinese perspective this unique path has allowed China to maintain social stability, national securit3t, self-confidence and favorable investment climate for attracting foreign aid and direct investment. In a way, social stability and national security become the pro-conditions for economic development.

　　China started with the “easier” reforms, relying on home-grown and second-best institutions – the household responsibility system (HRS) - followed by an expansion of township and village enterprises (TVEs), a gradual liberalization of trade regimes via special economic zones (SEZs), using dual-track prices at an earlier stage, and liberalising prices at the margin and opening up to the global economy. The more complex reforms started relatively late in the process: fiscal reforms (1994) and financial reforms (after 2000). "Crossing the river by groping me stones beneath me surface" became the hallmark of China's economic reform. This incremental, learning by doing and innovative approach has also helped firms and institutions to adjust and new entrepreneurship to develop, so that the private sector can out-grow the state sector (Figure 3 in Annex 1). In accordance with this learning and Innovation process, China's development can be divided into three periods.

1. The first per.iod was a phase of home grown reform and economic liberalisation (1980s), with the introduction of the Household Responsibility System in the countryside, price reforms and the rapid development of township and village enterprises (TVEs) and special economic zones (SEZs).

2. The second period (1990s) was a phase of economic growth, institutional transformation and the externalization of costs (social and environmental) of this development, mainly benefiting the urban areas and producing a rising income gap.

3. The third period (the first decade of the 21st Century) was characterised by enhancing efforts to modernizing institutions making laws and regulations conform with the WTO and other international standards, and to "rebalancing" the growth pattern and to address the social and environmental consequences of China's rapid growth., (Gransow and Zhou 2009).

　　Strategy 1: Household responsibility system and its tremendous impact on poverty reduction. The replacement of collective farming with a household-based system, later known as Household Responsibility System (HRS), started spontaneously in Fengyang County, in Anhui province in late 1978.Seeking to end their food shortage, peasants had started to implement a policy of contracting collective land to families (Du 2006). First an illegal practice, up to 1980, the HRS was scaled up to 45 percent and to 98 percent in 1983 (Lin and Wang 2008). The most important implication here is that the policies accommodated the spontaneous actions on the ground. The adoption of the HRS, together with agricultural product price increases were key elements of the rural reform in 1978-84, which unleashed farmers' Incentive and led to rapid agricultural productivity growth and poverty reduction. Nearly a half of the total rural poverty reduction happened in this early stage of reforms (Lin, 1987, 1992, and Ravallion and Chen 2007).

　　Strategy 2: Township and village enterprises: leaving agriculture but not the countryside. As the agricultural sector developed rapidly after 1980, it created a surplus of labour as well as savings which greatly expanded the opportunities for township and village enterprises (TVEs). They came into existence under the People's Communes system in 1971. Fiscal decentralization started in 1979 provid8d incentives for local governments to develop their local economies through supporting TVEs. Employment in TVEs increased from 28Million in 1978 to 95 million in 1988 at the peak (SSB 2007). This development had led to rising rural incomes and a labour reallocation from agricultural to non-agricultural sectors. The dynamism of TVEs and other nonstate enterprises exerted pressure on the SOEs and triggered the restructuring of the SOEs. The increase in competition among the enterprises and between the state and non-state enterprises also increased the productivity of the SOEs. The development of nonstate enterprises significantly rectified the misallocation of resources. The technological structure of nonstate enterprises was more in line with China's comparative advantages.

　　Strategy 3: Setting up Special Economic Zones-Attracting Foreign Direct Investment for job creation. In establishing Special Economic Zones (SEZs) in 1979China broke sharply with socialist orthodoxy and allowed China to gradually open its trade and investment regimes and follow its comparative advantages. It was only after Deng Xiaoping's “Southern Tour" in spring 1992 that a flood of FDI into China was unleashed. With the establishment of Pudong special zone in East Shanghai at the beginning of the 1990s and 18 other new zones approved in 1992/93. Foreign Direct Investment from Europe and North America rose dramatically. China has become the second largest destination of FDI since 2003. Over 150 million to 200 million rural migrant workers are employed in the coastal regions while policy restrictions for rural-urban migration have been gradually loosened. Increased labour mobility has allowed more efficient resource allocation leading to productivity growth, inclusive growth and poverty reduction and welfare improvements (Lin and Wang 2008).

　　Strategy 4: Investing in infrastructure and regional development. Since the 1990s, China has been pursuing a policy of economic expansion with extensive investment in the country’s infrastructure, particularly in the transport, traffic, energy, telecommunications and water supply sectors. The financial crisis in Asia in 1997/98 has led to intensive efforts to build infrastructure through fiscal stimulus and a strategy of "Going West”, aiming at accelerating the development of the western and central provinces of China. In 10 years China’s highway grew from 4700 km in 1998 to 50,000km and large container ports expanded. Additional large-scale projects include the railroad line from Golmud to Lhasa, which like the dam is part of the Western Region Development Strategy; a water supply project to pump water from the south of the country to the north; and high-speed rail lines from Beijing to Tianjin and from Beijing to Shanghai. Physical infrastructure has lowered the trading cost and greatly facilitated a rapid trade expansion. (Gransow and Zhou2009).

　　Strategy 5: S1riving for a harmonious society inside and outside China. The unintended impacts of economic growth such as a growing income disparity, environmental degradation and external imbalances became pressing concerns. The fourth generation of political leadership in China proposed a new approach to development called the "scientific development concept" (Hu 2004). The concept of "building a harmonious society" was proposed in 2004, including series of new policy measures to remove some urban-biased policies. Examples include a) phased out agriculture taxes; b) increased government expenditure on agriculture, rural residents and rural areas; c) improving rural social services and low-income guarantee; and d) lifting restrictions on rural-urban migration further, and providing social services to migrant workers and their families. Meanwhile, a White Paper on China’s peaceful development was published in December 2005 which can be seen as a complementary part of the harmonious society concept. The White Paper presents China's development as contribution to world peace and as a strategy to realize a peaceful world with common prosperity, stressing the principle of mutual benefits with other countries. The concept of a harmonious China in a harmonious world has emerged. (Gransow and Zhou 2009).

　　In sum, China's broad-based growth and development may be attributable to (1) a strong leadership and commitment for development (2) a preference for experimentation, including piloting and the scaling up of successful experiments and (3) an open-minded learning spirit: first through learning from Chinese people’s ingenuity and innovation on the ground, and then a nationwide collective learning from development partners and foreign investors. Realizing China's reform and development process is still not complete, several

　　Chinese officials indicated that "China is successful because it has been a good student, implying there is a lot to learn to meet the current challenges.

2. 2 Foreign Aid as sources of CapitaLand knowledge for poverty reduction

　　Drawing on lessons from its past (with the former

　　Soviet Union), China insisted on "self-reliance" as the main principle for its development. For 18 years in the 1960-1978 period China did not have domestic debt or foreign debt. In 1979, China started to approach international organisations such as UNDP and the World Bank for development assistance. The guiding principle seems to be what Deng Xiaoping said to Robert McNamara, that China can develop with or without the foreign development assistance, but China can develop faster with foreign aid (World Bank 2008). It was with this self-confidence that China started to actively seek and receive both multilateral and bilateral assistance, the latter starting with a loan from the Japanese Government in 1979.

　　During the last 30 years, external economic and development co operation played significant roles In promoting growth and poverty reduction, directly as a source of capital and indirectly through facilitating economic transformation and social development, as well as through enhancing capacity to adopt international best practices. In more recent years, the policy advice and knowledge services are appreciated more than the amount of capital provided. "The most important benefit China received from foreign aid is the introduction of new ideas, the opening of mindset and the dissemination of knowledge.” (Kang Binjian).International development partners were considered "teachers" and they "played an irreplaceable role in China's development effort." (Zhou Hong)

　　In particular, China's poverty reduction strategy was heavily influenced by international best practices shifting from targeting poor areas to targeting poor households. Periods of rapid poverty reduction were those where the focus was on rural reform and strong policy support to agriculture, such as 1979-84 and 1994-96. When this rural emphasis was lacking, poverty reduction slowed, in particular in 1985-1993 and 1997-2002. International donors have contributed to growth and poverty reduction in different ways in the following 4 periods.

1. Phase 1979-1985, a period of rural reforms symbolized by the Introduction of home-grown institutions such as HRS, TVEs and SEZs, which unleashed the productive capacity of rural households. A lack of foreign exchange constrained China's development. International donors contributed mainly to the development of China's economic infrastructure by providing capital and modern technologies. Multilateral donors and Japan invested in China's infrastuctue and energy as well as, agriculture.  International competitive bidding (ICB) was introduced in 1984 in a hydropower project located in Lubuge. Yunnan province, creating a "Lubuge shock<' (Lu and Wang 2004).

2. Phase 1986-1993, development-oriented poverty reduction policies were targeted at poor regions, not at poor households. Poverty alleviation funds were offered as loans rather than grants to build on productive capacities. Institutions such as the State Council Leading Group for Poverty Reduction were established.

3. Phase 1994-2000 (8/7plan): The aim of the 8/7 plan was to lift 80 million people out of absolute poverty within seven years (1994-2000). Food and clothing shortages for the rural needy were to be essentially eliminated by the year 2000. This coincides with a period of rapid institutional transformation in preparation for the WTO accession. International donors provided technical assistance and investment in poverty reduction, environment and social development. Between 1995 and 2000, China's LGOP invested around 5.27 billion Yuan in poverty reduction, with a significant share coming from development partners (Wang Guoliang 2005).

4. Phase 200.-2010 (10-year program). The government continued its efforts to combat rural poverty by concentrating its focus on poor areas. However, after extensive South-South exchange of experiences which began in 2004 via the Global Conference on Scaling Up Poverty Reduction held in Shanghai, more attention has been shifted to poor households. In 2009, a new anti-poverty standard has been implemented benefiting low-income people in the rural areas. Meanwhile, to "rebalance growth", more foreign aid (60 to 70 percent of total) went into environmental protection, pollution control, clean energy, renewable energy, resource conservation, health, culture and education, climate change, public goods and high-level policy consultancy. (Details were presented by representatives from BMZ.DFID, EU, JICA, etc).

　　Box 1 Volume and Distribution of official Development Aid in China

　　What is aid? According to the OECD definition, development aid includes grants and concessional loans (with a grant element of at least 25 percent) that are used for development purpose. Based on this definition and OECD statistics, the total sum of net disbursements (grants plus loans minus loan repayments) of official development assistance (ODA) to China during the period 1979-2007 was USD 49 billion. Of this, USD 20.5 billion was in grant farm and USO 28.5 billion In (net) loans. The first half of the 1990s saw a steady rise in ODA; during the second half of the 1990s ODA contributions to China fell and rose again during the first years of the 21st Century.

　　According to statistics compiled by China's National Development and Reform Commission (NDRC), disbursements of bilateral and multilateral loans (some of which were not concessional enough to qualify for recording as ODA) to China between 1979 and 2005 totalled USO 83 billion. By far the largest bilateral donor to China has been Japan with more than USD 20 billion in loans and more than USD 6 billion in grants. It was also one of the first bilateral donors to China. The second largest donor has been Germany with USD 4.2 billion in loans and USD 3.44 billion in grants between 1985 and 2007. Other donors included France, Spain, Italy, and United Kingdom. Switzerland, Austria. Netherlands, Belgium, Canada, Australia, Sweden, Finland, Denmark, Norway, Korea, Israel, Saudi Arabia, Kuwait, Russia, Poland and Luxembourg and others (NDRC 2009).

　　Sectoral composition: More than half of these investments went into the transport and energy sector. Indeed. For the AsDB and Japan, about two thirds of lending was directed into these sectors. Grant funding, which according to MOFCOM amounted to no more than USD 6.6 billion over the last thirty years, mainly went into the following sectors: education, environment, rural deployment an reform and others  (MOFCOM 2009:8).

　　Over time, the allocation of foreign aid to China has allocation has moved from the east to the west and the form has gradually shifted from grants to more concessional and non-concessional loans. The partners have also changed from the "government-to-government' model to a 'many-to-many' model where the private sector and NGOs play significant roles. For example, USAJD has been working mainly with the private sector and NGOs.

　　Source: Gransow and Zhou 2009, 'China and international Donors: Analysis of Development Management in China”, background paper for the China-DAC Study Group. (Section II)

2. 3 Key Elements for China's success in managing and utilizing development aid

　　Strategies and principles. In receiving and managing foreign aid, China has insisted on the principle of "Self-Reliance: Utilise others' experience to achieve one's own objectives". Chinese leaders firmly believed that "no one knows the country better" - that donors do not have the full information needed to "run the country

　　For any development aid project, the government is the initiator, information provider, the co-financier, the guarantor, the negotiator, and the implementer (Zhou Hong). "China has also managed ideas' and selected those ideas that were considered suitable to local conditions (l. Ohno). During many negotiations, the Chinese government insisted on the principle that "Foreign advice and technology must adapt to local conditions". Over the years, China has become an equal partner with foreign donors, and during a negotiation, "both sides have veto power.” (N. Hope) In a few cases, where the project was rejected by the multilateral or bilateral donors, the Chinese government found alternative fiscal resource to finance the project in question. This strong leadership and ownership of the development agenda is an experience that is relevant to African countries.

　　Utilizing foreign aid for China's overall development.

　　A condition for effective aid programmes in China is the effectiveness of the 1ong-term development plan, and the consultation process around it. Starting with the earliest stages of reforms, China established a set of institutional arrangements for managing foreign aid. However, the most important aspect is to incorporate foreign aid and concessional loans into the consultations around the 5-year development plan. The following policy was written in the 8th 5-year plan “we have to actively and effectively utilize foreign capital, try to obtain more multilateral and bilateral government loans, especially those loans with mare favorable conditions. " In particular, lists of priority sectors and projects were usually provided to multilateral and bilateral governments in order to guide the work of foreign donor agencies in a direction that is consistent with the 5-year plan. There are three criteria for selection of donor projects. a) they must be consistent with China's long-term development plan, b) they must be consistent with China's poverty alleviation plan, and, c) they must be consistent with local conditions. In this way, foreign aid programmes and projects have been fully integrated into China's own development plan and its implementation.

　　Donor Coordination In China, the government takes the lead in coordinating donors. The aid co-ordination problem was solved by the active management of the process by the Chinese slate; there was no donor group in China. Starting from the beginning of the reform process, China established a management system for foreign development assistance led by the Ministry of Commerce (formerly, MOFTEC). During the preparation of the five-year development plan, the planning agency takes the lead in a consultation with ministries and localities regarding their development needs, and then reconciles with the national development plan. 'Priority sectors' to be supported are provided to donors and investors. Then the MOFCOM initiates the discussion with bilateral and multilateral donors. The Ministry of

　　Finance serves as the window agency for the World Bank, ADB, other multilateral financial facilities and bilateral donors (JICA). This approach can be characterized as "centralized co-ordination by government agencies, and localized implementation by provincial and local governments'. From the Chinese perspective, this counterpart agency or “window agency" system may have improved information flows, reduced the transaction cost of coordinating donor agencies and relieved capacity constraints. However, from the donors' perspective, co-ordination amongst donors through these window agencies has sometimes been difficult and transaction costs high for various reasons including high institutional boundaries, vested interest groups and capacity constrains within some ministries (K. Leitner; and R. Hass).

　　Institutions for learning and capacity building, China developed institutions to enhance human capacity for implementation: new departments and centers were established at the NDRC. MOFCOM, MOF, and LGOP to specialize in coordinating donors and managing joint projects. China's learning was selective: 'China did nothing but what they really wanted to do" (N. Hope).

　　Project Implementation Units (PlUs, or Project

　　Management Offices in China) and project managers have played significant roles as bridges between donors and clients. Realizing the gaps in capacity, the government established 'project committees" and PlUs at provincial and county levels, in an attempt to bring together the human resources needed for implementation. Coming from different backgrounds such as teachers or technicians, the project officers were trained annually off-me-job and on-the-jot), and had a deeper understanding of the new ideas and international practices (R Haas). Many of the trained project managers in the PlUs were promoted to director-generals in government agencies such as the LGOP and MOF. In addition, they were paid the same salaries as their co-workers and they remained internal to the “system”, not external as hired by donor agencies.This arrangement ensured stability and encouraged trained project managers to remain in the country system for a long period, get promoted and thus reducing brain-drain as has happened in African countries.

　　Co-funding mechanism and accountability system. For each development project, the government of China has provided co-finance, albeit in different proportions, and at different levels. in recent years, project proposals have generally come from the provincial governments which committed to provide co-financing and to be responsible for repayment of the loan. Then the central government (NDRC) approves the projects according to the three donor agencies As such, this mechanism shows the provincial government's ownership and commitment for such projects, and they are also held accountable for the implementation of the projects as well as the evaluation, repayment and follow-up work. Provincial officials are often promoted if the projects are implemented well and demoted if the local economic growth fell or graft is found. This mechanism has also made clear that a specific level of the government (or ministry) is responsible for the management and maintenance of the project in question.

　　In sum, development assistance has played a significant role In China's growth and poverty reduction. The Chinese government and people appreciate it because it opens windows to new ideas, new approaches, new knowledge and experiences, and it facilitates the needed institutional reforms that may otherwise be blocked by interest groups. However, learning is neither costless nor painless. China has paid "tuition" for learning – by establishing the needed institutions, offering profitable opportunities to foreign invested enterprises (FIEs) and joint ventures, as well as accepting conditions such as "tied aid". Over 50% of bilateral aid to China in the 1980s and early 1990s was tied aid (NDRC2009). Still China has learned from tied aid in the early stage of its development because turn-key projects, for example, provided the much needed capital and advanced technology. China has also learned specific knowledge, managerial know-how, techniques and systems from tied aid through technical cooperation, Deve1opment assistance also helps with training and capacity building through development projects and through training of PIU officials. The knowledge transfer and capacity development is actually embodied in the growing cadre of development practitioners who were project managers.

2. 4 What is relevant to Africa and other developing countries?

　　Despite significant differences, China and Africa bear some resemblances historically. Participants seem to agree that China's development experience is credible and there is much to be learned. First, China’s approach is a learning model which follows a pragmatic (rather than ideological) approach, allowing policy space for experimentation and learning - both from successes and from mistakes. All countries are free to select their own development models and paths, but they need to learn from each other, and they need to explore and discover their own potentials. Since "learning is neither costless nor painless", this "willingness to pay and work for learning is what African countries can import from China.

　　Second, China’s approach may be characterized as an ownership model where a country and people take development in their own hands. There is no "China model" that could be replicated easily, but the development path China selected has unique features and implications. Some pointed out that China has a "developmental state", where the central government takes the leading role in providing the vision, the roadmap (development plan) and the incentives for growth and poverty reduction, and local governments take the initiatives to implement, with the support of the population. The rapid growth was mostly internally driven, and the government is held accountable to deliver what was promised. External forces played an important catalyzing role.

　　Third, China got the sequencing right: they developed agriculture first, and then infrastructure and the manufacturing sector, before moving onto social protection, education and health reforms and the environment. (D.Brautigam2009). China's approach is from the bottom up; often, the government provided the policy space for experiments and accommodated successful approaches initiated by people on the ground (J.Wuttke). In the earliest stages of reform, successful local initiatives on the ground were adopted nationwide and scaled up, such as the HRS, TVEs and the ZhuCheng model of privatizing State owned enterprises (SOEs). Fiscal decentralization has provided incentives for provincial and local governments to develop the local economy. China's pragmatism has allowed it to draw on international experiences while always being mindful to adapt them to the specific Chinese situation. After testing a new model's applicability, China is able to "roll it out and scale it up" nationwide.

　　China is not alone in successful learning. In the past, Japan, Korea, Singapore and Malaysia were recipients of foreign assistance. These countries have shared information and learned initially from Japan and other development partners, and then learned from each other, and eventually graduated from aid. One of the important features of the East Asian experiences, including that of China, is that they managed aid very well, using it as a vehicle to acquire knowledge and skill necessary for their development. Furthermore through aid, trade and investment, East Asian countries have accelerated their regional integration, developed production networks, and all benefited from this partnership. (I.Ohn0)

　　III. Development Partnerships and Africa's Growth and Poverty Reduction

　　Since 1960, nearly USD 600 billion (in 2007 prices) of ODA has been provided to sub-Saharan African (SSA) countries by the OECD Development Assistance Committee (DAC) countries (See Figure 4 based on OECD-DAC data). There has been a heated debate on the effectiveness of this aid. Several speakers discussed development partnerships between DAC, EU, US and African countries. For example, the partnership between EC and Africa started in 1959 and the EDF agreement is renewed every 5 years. Development aid to Africa has increased over time and played a significant role in restoring law and order, respecting human rights and improving governance (Cauwenburgh). Not all donors and recipient countries are satisfied with the current status of partnership in Africa (R.Haas). Therefore, internationally, there are clearly efforts underway to improve the effectiveness of aid. as demonstrated by the broad support received for the Paris Declaration on Aid Effectiveness (2005) and the Accra Agenda for Action(2008)(OECD publications).

　　Seeing Africa as a continent of potential opportunities, China has intensified its development co operation and broader economic engagement in Africa. Chinese Premier Wen Jiabao said that "China's total aid to Africa amounts to RMB 76 billion by the end of September 2009, and by the end of 2008, the amount of various loans reached around RMB46 billion ", In terms of trade, China-Africa trade has registered an average annual growth rate of over 30% in the past eight years, and exceeded USD 108 billion in 2008. Chinese investment in Africa has expanded steadily as direct Investment in the continent amounted to USD 5.5 billion in 2008 (Chen Deming, Nov 2009).

　　This section discusses various development partnerships established in Africa, what approaches have been used, and what China and established donors can learn from each other in their engagement in Africa.

3. 1 What kind of development partnership has worked in Africa?

　　Africans showed great ingenuity in the creation of ancient civilization and national independence. In recent years, more than 15 African countries have achieved significant growth and poverty reduction - an African model is emerging (Li Anshan 2009). Several speakers summarized the experiences and lessons. In Uganda, after the introduction of the poverty eradication strategy in 1993, the poverty incidence declined from 56% in 1992 to 30% in 2007. This achievement in 15 years was tremendous. There were five pillars in supporting this strategy - making economic development the priority, good governance, human development and improving the investment climate for private sector development. These policies were effective and helped pave the way for greater trade and investment with development partners. including China (Fred Omach).

　　Managing donors, case 1 In South Africa – a middle-income country that has overcome aid dependency, ODA accounts only for 1% of the government's budget. The government considers aid as a vehicle to bring innovative ideas and to enhance capacities on macro and risk management. The government takes control and decides on the priorities, and manages, through IDC of the Treasury, 30 active development donors/partners. An information system for development co-operation (DCMS) was developed to increase the transparency of development co-operation. South Africa participates actively in the global effort to improve aid effectiveness, in the monitoring of Paris Declaration, and played an import Formulation of the Accra Agenda for Action. (MokgadiTena)

　　Managing donors, case 2 Similarly, Ethiopia policy ownership with a clear leadership vision, and established a new framework of working with development partners “to use aid for graduation”. Ethiopia’s leadership has adopted “Agriculture Development Led Industrialization" and approached donors individually, requesting industrial support from each donor according to their comparative advantages. The government has been leading development partnerships, managing not only aid relations but also policy content, Ethiopia and China have established a long-standing bilateral relationship and "China is acting as a strategic co-operation partner, rather than a donor, by bringing in a new culture of work and ethics" (lzumi Ohno).

　　Coordinating donors. Tanzania is one of five East African countries that have built financing partnerships quite successfully. Development partners provide over 30 to 40% of the government budget. In the last few years, the government has started to co-ordinate the activities from different donors and established a database. Among donor support, around 37% is budget support, 45% supports various projects and 15% as multi-donor basket programmes. For Tanzania, managing and co-coordinating a total of USD 0 7 to 1.9 billion in aid placed a heavy pressure on its administrative capacity. In previous years, there were over 900-1400 projects and it was very difficult to co-ordinate. Tanzania would prefer to receive more budget support - currently 11 bilateral and 3 multilateral partners coordinate and provide budget support. This model allows the country to take ownership and allocate funds effectively. (Judica Omari)

3. 2 China's Strategy for its Development Co-operation in Africa

　　China is still a developing country with much lower per capita income than all of the OECD-DAC countries. Fundamentally, China's co-operation activities in Africa are different in nature from those provided by OECD-DAC donors. China considers development co-operation with Africa as fraternal help "between the poor brothers and sisters in a family". Africa and China after 1840 share the same colonial past, but China has not colonized any country. China follows the "five principles of peaceful co-existence" and "Eight principles of foreign aid" that were made by the late Chinese Premier Zhou Enlai in the 1950s and 1960s, respectively. Those principles stress mutual respect, reciprocity, mutual benefit, and noninterference in domestic affairs. Aside from adherence to the "One China' principle, no political strings are attached to China's co – operation.

　　Some participants felt that the general principles thatguide China's foreign aid practice have seldom

　　changed, An example is the Tazara Railway built in 1970-75 linking Zambia's rich copper belt to the coastal port of Dar es Salaam (He Wenping 2009). However, the motivation behind China's co operation with Africa has shifted from being driven by mutual (political) support in the 1960s and 1970s to one that focuses on mutual (economic) benefit based on complementarities of the two sides. This transformation of foreign aid strategies has seen the contributions from all four generations of leaders, based on their different experiences and priorities at the time. Early generations of leaders were focused on breaking the political isolation through gaining African support at the United Nations for the resumption of China's seat, In recent years, as China has become a market economy, this focus on mutual support has given way to economic complementarily based on market principles.

　　Second, China's development co-operation aims to help African countries build their productive capacity for self-reliance and self-development Drawing from its experience in domestic poverty reduction programmes, China has placed greater importance on enhancing poor people's productive capacity than on cash transfers. This philosophy follows the thousand year-old traditions of not only "offering fish but also "teaching how to fish."Thus, China's development co-operation programmes in Africa have a strong focus on building, for example, small farms, and agro-business processing plants, and agricultural demonstration centers.

　　Third, much of China's rapid growth was attributable to its openness to international trade. Drawing on this experience, China combines aid with trade, believing that trade based on comparative advantages can be mutual beneficial. On the one hand, China's factor endowment has been changing, and one of its recently acquired comparative advantages is in building large infrastructural projects at a low cost. Some African countries are rich in natural resources but poor in capital and skilled labor. In these cases the two sides have different natural and factor endowments, and may be complementary to each other. On the other hand, in cases where the comparative advantage of the two sides clashes (such as in textile and apparel), free trade alone may not benefit both sides equally. Development cooperation should than focus more on technological transfers through direct investment. training and capacity building.

　　Fourth, currently there is no official definition of China's foreign aid with corresponding statistics. Differing from the OECD definition, China's foreign aid includes grant aid, interest-free or concessionary loans, and assistance for joint ventures or cooperation (Tian, Gang, et al). Clearly the Chinese government is combining aid, trade and investment to leverage its impact. In some cases, aid has been used to support Chinese companies "going global- and become globally competitive. The Minister of Commerce indicated that "Chinese companies have grown stronger and reaped rich profit in the vast African continent" (Chen 2009) The China-Africa Development (CAD) Fund has been established to use government funds to invest in the equity stock of Chinese companies operating in Africa ("Using Government funding, but operating on market principles").

　　China has several aid deliver}r mechanisms which are different from that of the established donors, one of the reasons being that China lacks a web of NGOs, churches, and private consultants and specified Implementation agencies. Another feature is the heavy use of turn-key projects as in-kind assistance based on African countries' requests.  After receiving a request for a construction project, a needs assessment is conducted, followed by a domestic bidding process. After a contractor is selected, it is fully responsible to complete the project within the budget and time frame, be paid by the Chinese ministries in Chinese currency, renminbi (RMB), and turn the keys to the African government for operation. Admittedly this is a form of tied aid. But this contractual arrangement does reduce the transaction cost and the potential of leakage or misuse of funds. (LiXiaoyun 2009).

　　Fifth, there are many types of players in China's engagement in Africa, including policy banks: provincial governments, large state owned companies and commercial banks, and privately owned small and medium-sized enterprises (SMEs). In a sense, China's partnership in Africa is also a "many to many" model of partnership. Each partner's behavior is very different. African participants noted that large state owned companies' behavior is much better (in terms of law abiding) than those of the small and medium sized private enterprises. Both Chinese government and African governments need to strengthen the regulations of contractors of aid projects. In the recent FOCAC the Chinese government promised to require Chinese companies to 'shoulder more social responsibilities and live in amity with the local people." However, it remains to be seen what concrete steps are taken to achieve this.

　　Sixth, China has started to contribute to building several joint industrial zones in Africa, e.g. the Chambishi zone in Zambia, the Terre Riche zone in Mauritius, and the Terre Zone in Nigeria. These zones are intended to attract clusters of industries from China and elsewhere, following the pattern of the "flying geese" phenomenon. Japan initially played a crucial role in intra-regional integration by leading the industrial transfer to East Asian countries. After the 1985 Plaza Accord, Japanese firms started to relocate abroad. East Asian Newly Industrialized Economies followed this pattern of "Flying Geese" (Akamatsu 1962, Kojima 2000). Production networks first developed between Japan, Korea, Taiwan (China), and then gradually moved to Malaysia, Thailand, and later to China and Vietnam. Similarly, several clusters have been developed in Africa. However, it is unrealistic to assume that production cost of goods produced in those zones will necessarily be lower than those produced in Asia. A policy and regulatory framework must be in place to encourage firms to transfer technology, provide training and help build local capacity.

　　Certainly China did not do everything right in growth and development, and both positive and negative lessons should be learned: China's strong drive for industrialization is associated with widening rural-urban income disparities and a degradating environment. In March 2007, the Chinese Premier Wen Jiabao pointed out that China’s growth was "imbalanced, inequitable and unsustainable." The government has stressed the need to build a people-centered and harmonious society, moving from a strong drive for industrialization to paying more attention to the service sector, from a single-minded focus on 1he speed of growth to an approach oriented more towards the quality of growth. During this global financial crisis, export demand declined drastically and China was forced to "rebalance" its growth to reduce its dependence on exports and investment, and focus more on domestic consumption, social services and environmental sustainability. This trend will influence the sectoral composition of China's development co-operation activities, as shown by new measures dealing with climate change which was included in the eight measures China offered to Africa in November 2009.

　　Box 2. China's Development Cooperation with Africa: Official Development Aid and Other Official Flows

　　This box shows that China is indeed playing a growing role in development cooperation with Africa, although the magnitude of this cooperation is not as huge as some reports have indicated.  However, if Other Official Flows (OOF) are included, China is becoming a partner of roughly the same importance as established donors like the United States and Germany.

　　Definition issues. China does not use the same definitions used by the OECD. For example, China includes preferential export buyers/sellers credit in their pledges for concessional loans; and uses some of their foreign aid money to support joint ventures between Chinese firms and firms in developing countries. China includes military aid in its expenditure for general foreign aid. These should be excluded from ODA. According to the OECD definition, ODA includes grants or loans which are a) undertaken by the official sector; b} with promotion of economic development and welfare as the main objective; and c) at concessional financial terms (if a loan, having a grant element of at least 25 percent). Technical cooperation is included in aid. But grants loans and credits for military purposes are excluded. Other official flows (OOF) include those loans that have a grant element of less than 25 percent. (On OECD definitions see http://www.oecd.org/document/32/)

　　In a path-breaking book, The Dragon’s Gift Professor Deborah Brautigam provided a useful method to estimate China's development aid to Africa, and concluded that 'China committed approximately $1.4 billion in official development aid to Africa (including debt relief) in 2007,  ... and this should reach almost $2.5 billion by 2009' (page 168, Brautigam 2009). The author based her estimate on three pieces of information: Ministry of Finance external assistance expenditure, China Eximbank concessional loans and debt relief.  The first part came from China Statistical Yearbook. The concessional loans were based on China Eximbank's annual reports until 2001 and used a growth rate of 35Yo to extrapolate onward. Then she added an average debt relief of $450 million for each year from 2001 to 2008. This would make China's official development aid in 2007 approximately $3 billion in total (including debt relief).

　　How much of this aid is going to Africa? Based on various interviews with Chinese officials, in step two she assumed that from 30 to 44 percent of China's total aid is allocated to Africa -leading to an estimated $309 million in 2006. She assumed that 50 percent of Eximbank's concessional loans go to Africa. Finally, Chinese cancelled $3 billion in debt for Africa between 2001 and 2008 with more promised, implying an average of $375 million per year (80 percent of China's debt relief goes to Africa). In step three, she assumed various growth rates for different parts of China's development aid to Africa. First, she assumed that China would deliver its promise to double official aid to Africa between 2006 and 2009, reaching $600 million. Second, the Chinese government pledged to commit $3 billion in concessional loans to Africa between 2007 and 2009. She assumed that this will be allocated across three years. And finally, she assumed that debt cancellation will continue at the same rate, at least through to 2009. That final amount is $375 million per year from 2001 to 2009. Box Figures 2 below shows the results of her estimation.

　　How does China's aid compare with those of the traditional donors? As indicated above, Africa probably received ODA commitment of about $1.4 billion from China in 2007, which is smaller than established donors such as the United States ($7.6 billion), EC ($5.4 billion), France ($4.9 billion), UK ($2.8 billion), Japan ($2.7 billion), and Germany ($2.5 billion). Although China's aid is likely to have doubled by 2009, and Chinese leaders have promised more in the next three years (committed in the 4th FOCAC meeting held in Nov 2009), it is likely to still be relatively small compared with the traditional donors (page 172, Brautigam 2009).

　　Consistent with China's approach of combining aid, trade and investment, Brautigam went further to compare "apples with apples by showing commitments for ODA, official export credit and other official flows, and private bank loans and non-bank export credits.  It confirms that "China is a formidable financier for Africa, … .On a bilateral basis. China comes third behind the US and Germany". (Page 183)

　　Cross country comparison: a dataset was compiled for this synthesis report showing China's ODA as a percent age of GNI as compared to those for OECD-DAC countries. According to the next figure, it is found that China's aid to other developing countries started from a relatively low per capita income level. Using Braudigam's estimate of $3 billion as total ODA in 2007, China's development aid accounted for 0.09 percent of GNI, which is lower than all OECD member countries, as expected. However, if one draws a linear regression line on this scatter chart, China is located well above the regression line, indicating that China is contributing a relatively significant proportion to development cooperation as compared with its per capita income level. lt, however, total official flow (ODA+OOF) is used, this ratio would have increased to over 0_18 percent of China's GNI in 2007. Hopefully, this proportion will continue to grow in the future.

3. 3 Perspectives of Africans and donors:

　　What types of partnership have worked, what have not?

　　African perspectives are based on the four-country consultation organized on October 20, 2009. Participants highlighted the importance of China's engagement in Africa, including by providing Africans with new leverage on other donors. They welcomed China's continuing support for Africa's development, noting that its trade and investment had significantly contributed to Africa's growth. Participants welcomed China’s focus on infrastructure and investment, which was helping to build longer-term growth in Africa. Commentators also suggested that China's approach 'engendering ownership and self-reliance" (Manji 2009. page 7) many participants felt that China should also consider investment at the regional and the sub-regional levels (ACET 2009),

　　Participants welcomed the continued exchanges of knowledge and learning between Africa and China, in particular in the areas of technology transfer. However, many..., participants expressed frustration over a lack of transparency on the terms of Government-sponsored commercial deals and on China's development co-operation activities, and demanded more donor co-ordination, predictability and stability of aid. They raised issues related to tied aid and local employment generation, hoping that Chinese companies could employ more local firms and workers and help enhance their capacities. They raised issues regarding the quality of goods and services, environmental standards and market access. But they also recognized that language barriers and the need to balance local employment objectives with the imperative to finish contracts on time and within budget were real difficulties that needed to be surmounted (ACET 2009).

　　In sum, participants felt that China-Africa was a key strategic relationship for both Africa and China, and that there was much to learn through an exchange of knowledge. However, the amount of China's aid is still small as compared to that of OECD-DAC donors. There is a danger of unrealistically high expectations due in part to the non-transparency in China's aid activities. But ultimately the responsibility of development rests on the shoulders of African themselves. Several commentators suggested that "Africans must take control of our own destiny”.

　　The established donor community in general welcomes China's emergence as a donor. The donors acknowledged and appreciated the difference in the approaches adopted by China and other donors on partnership. However, they also acknowledged that China’s activities in Africa are leading to adjustments by all stakeholders. They raised concerns over several issues.

　　Over the years, established donors have made many efforts to harmonize their aid through greater 1.ransparency, better information sharing and increased co ordination. For example, an international consensus has been reached on the concept of official development assistance (OECD-DAC 1969). Furthermore, through their membership of the DAC, donors agree to share internationally comparable data in a timely fashion on their development co operation activities. Evidence also shows that co ordination and harmonization are achievable and are taking place in many developing countries, including Africa. (Mr. Jacquet, AfD and OECD). To the extent possible, China and other donors not in the DAC can help reduce transaction costs, alleviate the risks of misunderstanding and competition and increase development effectiveness by participating in donor co-ordination fora in the specific countries they are engaged in.

　　Second, from an international perspective, China is operating outside many existing norms and rules. Most of its aid is bilateral, and most appears to be tied (Brautigam 2009). But tied aid reduces the value to recipient countries by 10-15%, and it runs the risk of aid policy being "captured' by big corporate interests (Cauwenbergh). In addition, China has often approached African governments at the central levels only with limited channels to interact with the local community. Over the past decades some DAC countries have built up a multilevel approach with contacts from the central level down to the grass-root level. China could learn from established donors in this aspect and there could be a complementarity between China and donors here.

　　Third, China's development co-operation has been using the modality of project support with pros and cons. On the one hand, project support is related to China's comparative advantage, as China has acquired rich experience in designing and implementing large infrastructure projects such as railways, roads, bridges and harbors. But this approach of financing hardware is not sufficient to meet the needs of African people who need both the "hardware' as well as the "software", a point increasingly recognized by Chinese investors in Africa. Budgetary support may be more conducive to fostering ownership in the client countries, and reduces aid fragmentation. On the other hand, project support has the advantage of linking development aid with a concrete outcome which is easier to monitor and evaluate. JICA in particular has financed many projects on infrastructure - major economic corridors, and energy sectors in Africa, as well as poverty reduction and humanitarian aid projects, and the EU has financed infrastructure as well. (Peter Craig-McQuaide). In these projects, the respective roles of the principal and agents are clear - the government of the recipient country is the principal and the donor/contractor is the agent. The risk of confusing roles between the principal and the agent is lessened.

　　Fourth, a new type of partnership is needed for China, established donors and African countries where all stakeholders are equal, and each partner should be open minded about each other on the objectives, ideas and approaches. Admittedly, each country has its geopolitical interest, and aid is one of the tools to achieve that objective. For instance, DAC countries want alliances and stable countries; China is looking for economic mutual development and a peaceful external environment; Africa would like to find the best use of its own resources for growth and poverty reduction (P.White) and eventually become self-sufficient. Thus, development partnerships should be based on the principle of "diversity and complementarity" (I.Ohno). If all donors' advice is the same, how can partner countries choose and combine ideas? Thus, a new type of partnership should be more tolerant of alternative ideas and approaches so that client countries can select and combine these ideas.

　　IV. Policy Options

　　China's approach to aid, trade and investment was helping to promote growth and reduce poverty in Africa. Moreover, the emergence of China as a major player in African development offers African countries a choice. However, China could probably do a better job in learning from its own rich experience in managing development partnerships to inform its engagement in African countries.

　　As a responsible global partner, China is willing, and has started, to engage actively with existing international aid community through dialogue, understanding, and co-operation (as shown by several trilateral co-operations involving FAO, IFC, World Bank, UK on agriculture, and USAID in Liberia where a university is being built with the Chinese building the labs on the campus {P. White)). It is in everyone's interest to improve the effectiveness of aid and avoid repeating past mistakes. Current reforms embodied in the Paris

　　Declaration and the Accra Agenda for Action aim to improve aid effectiveness, including by improving co ordination and increasing transparency and predictability. China already endorses the Paris Declaration and accepts its principles. China may consider following through on this and join OECD-DAC as an observer and participate in regular meetings, so that China can share its development experience, and have more opportunities to influence debates and share information and data. Eventually, African stakeholders, China and other emerging countries should also participate in the rule-making process.

　　Therefore, the following discussion on policy options is based on China's experiences in the last 30 years which are largely consistent with the 5-pillars in the Paris Declaration but go much further.

1. Country Leadership/Ownership for Development

　　African leadership is key for an effective development partnership in Africa. For African countries to be more fully in the driver's seat, as China was, Africans need to develop their human and institutional capacities to define, lead and implement their own development process. A higher degree of ownership encompasses not only the commitment for development (promises), providing the roadmap (poverty reduction strategies or development plans) but also guiding donors and implementing what was promised (results). When the government takes control of the development agenda, donor ca-ordination is improved.

2. In order for African countries to be fully in the driver's seat in their relations with development partners, it will be important for them to have more complete information about levels and conditions of assistance, and on the real terms of the various commercial deals that partners are bringing to the table. "To drive requires a map and a clear goal and necessary driving skills and experiences: China and other emerging donors will need to be more forthcoming about their aid programmes, amounts and allocation, terms and conditions, evaluation results, experiences and lessons learned from the many years engagement in Africa, so that no one will repeat past mistakes.

3. For established donors, it is important to keep an open mind as China and other emerging donors offer some alternative models, Based on donors' experience in China, India and other developing countries, development is largely internally driven. Conditionality did not work well in China. Is conditionality consistent with country ownership? This is a topic that merits more research and rethinking.

2. Alignment and Harmonization

1. Donor countries have different comparative advantages and are committed to work together in a complementary manner (Paris Declaration article 33, 34, 35). African countries may consider selecting donors according to their comparative advantages and assigning tasks with a clear division of labour. In this way, donors can work in a complementary manner. This will create a win-win-win situation where all three parties will benefit.

2. Based on China's experience, governments should take the lead in coordinating and managing donors by holding frequent consultation meetings with all partners. This will facilitate information sharing and exchange of experiences among all development partners. In this regard, China is moving to the right direction by participating in these donor group meetings.

3. Both the “hardware" and "software" are needed by African countries and this is where coordination has a high payoff. China's market institutions are fairly young and the enforcement of laws and regulations weak. After China's accession to the WTO in 2001, over a thousand Laws and regulations were rewritten to make China's legal system conform to the WTO principles. As a result, Chinese economy grew faster after these legal and institutional reforms. Therefore, even though China is learning the international rules of the game, those rules and regulations related to development aid also need modernization. Exchanging knowledge and experiences with established donors can facilitate the learning process.

3. Implementing and Managing for Result

1. Established donors can learn from China in terms of speed and efficiency of project implementation, and effective integration of aid, trade and investment. The amount of aid is small as compared to direct investment. The Public-Private Partnership in combining trade, aid and investment merits some re-examination. For its part, China can strengthen its monitoring and evaluation and impact assessment to facilitate learning from past successes and failures.

2. In earlier years, international donors have invested heavily in China's agriculture, energy and infrastructure and other productive sectors. Similar support to Africa in productive sectors is much needed, but it has been declining in recent years. Going forward, all donors may need to work together to strengthen aid to infrastructure and productive sectors in Africa.

3. China is a beneficiary of untying aid, as multilateral development agencies have never used tied aid and nearly all bilateral donors have reduced the shares of tied aid or abandoned it after 2000. In 1984 it was the World Bank who introduced the international competitive bidding into large projects in China and later the Chinese Government adopted the ICB and other procurement rules as the national standard. As called for by the Accra Agenda for Action (2008), there is a clear international trend that the share of tied aid is declining. Emerging donors may consider also following this international trend.

4. Evaluation and Mutual Accountability

1. The ultimate responsibility for Africa's development rests on the shoulders of Africans themselves, who need to take control of their own destiny. Increased economic integration is also important for promoting development on the African continent. Greater leadership could help African countries to flesh out a regional strategy on infrastructure development that would better utilize the opportunities that China and established donors can provide.

2. Learning needs to be based on solid information and evaluation. Mutual accountability also needs evaluation and impact assessment. There is, however, an inadequate number of evaluation studies and impact assessment done by established and emerging donors on what worked and what did not, and why. This information would be invaluable for Improving partnerships and accountability for growth and poverty reduction in Africa. Incentives need to be provided to good performance by sharing this evaluation data among all development partners.

3. Specifically, the following table shows some options and examples for transforming development partnerships, to be considered by all partners (Exhibit 1), This is just for illustration.

　　Exhibit 1 Options for Learning and Transformationin Development Partnership

　　learning from the past 30 years of experience in China

　　China's approach is an ownership

　　model where the country selects

　　its own development path and

　　takes the lead and final

　　responsibility for development. The

　　Five-year plan process serves a

　　nationwide consultation process

　　across all ministries and localities

　　including development partners

　　China' s approach is a learning

　　and innovation model,

　　---learning from development

　　partners and insisting on "adapting

　　to local conditions"

　　Chinese Government takes the

　　lead in coordinating donors by

　　holding regular consultation

　　meetings with multilateral and

　　bilateral donors

　　China had insisted on donors

　　/investor working with local

　　partners and PMO officers far

　　learning and capacity building

　　China has benefited from

　　International competitive bidding

　　(thanks to multilateral agencies),

　　and from reduced share of tied aid

　　(thanks to bilateral donors)

　　China has used experiment

　　-evaluation in own development, and

　　avoided mistakes by "scaling-it- up

　　only if proven successful”

　　Consistent with the Paris Declaration and the Accra Agenda for Action 2008?

　　Consistent with pillar I on Country Ownership

　　Consistent with pillar II, Alignment with the country’s development strategy

　　Consistent with pillar III, Harmonization and avoiding duplication

　　Consistent with pillar IV, Managing for results

　　Accra Agenda for Action Called for Untying aid. This is consistent with Pillar IV

　　Pillar V, Mutual accountability

　　Implications to partners in Africa

　　African countries need to take a

　　higher level of ownership

　　Development partners may

　　participate in African countries'

　　poverty reduction strategy (PRS)

　　or development plan process and

　　provide data, information and

　　advice so that African countries

　　are fully in the driver' s seats with

　　full information on the amount,

　　terms and allocation of aid

　　Integrate aid projects with the

　　country's development plan

　　/poverty reduction strategy

　　Jointly hold regular consultation

　　meeting with all stakeholders

　　including multilateral and bilateral

　　donors in a country

　　Work closely with local

　　Governments, PMOs, and local

　　partners; transfer technology and

　　build local capacity.  Eventually

　　use the country systems

　　All development partners reduce

　　the share of tied aid, and

　　international competitive bidding

　　should be used, especially in

　　extractive industries

　　Conduct more and better

　　monitoring and evaluation and

　　impact assessment to provide

　　information for learning by all

　　partners

　　Going forward, a mechanism should be established for regular dialogue, exchange, and cooperation between China and the international aid community. More inclusive international discussion is needed for making new rules and standards, and reforming the development aid architecture. China and all emerging donors, and all development partners should participate in the rules-making process. More opportunities for mutual learning between traditional and emerging donors should be created such as the China-DAC Study Group and a joint evaluation process. Mutual learning also means listening to each other, adjustment, transformation and modernization by both established and emerging donors - new rules of the game will be made and new standards will be adopted. All partners should participate in this modernization process.

　　People living in hunger cannot afford to suffer the consequences of ineffective aid. Concerted actions globally are needed to meet the huge challenges of promoting growth and reducing poverty and hunger, challenges made more difficult by issues associated with epidemics and climate change. The lesson from China's development experience is that Africa's own talented people can do more to take their destiny in their own hands. The international community would welcome and support stronger African leadership and ownership of the development process. The result would be stronger development partnerships for growth and poverty reduction and a more peaceful and prosperous world.

　　Selected References

1. Note: unpublished papers and presentations were acknowledged by citing the speakers' names in parentheses in the text of this report.

2. Acemoglu, D; S. Johnson, and J. Robinson. 2001. "The colonial origins of comparative development." American Economic Review 91: 1369-1401.

3. Akamatsu, Kaname. 1962. "A Historical Pattern of Economic Growth in Developing Countries." The Developing Economies, Tokyo, Preliminary issue, No 1: 3-25.

4. Brautigam, Deborah. 2009. The Dragon's Gift: The real story of China in Africa.  Oxford University Press: New York.

5. Broadman, Harry G, et al. 2007,Africa's Silk Road China and India's New Economic Frontier, World Bank, Washington DC.

6. Bumside, C. and Dollar, D. 2000, "Aid, policies, and growth”, American Economic Review.

　　Chen Shaohua and Martin Ravallion. 2008. "The Developing World Is Poorer Than We Thought, But No Less Successful in the Fight against Poverty”, World Bank Policy Research Working Paper 4703,

7. Collier, Paul. 2007. The Bottom Billion: Why the Poorest Countries Are Failing and What Can be Done About 1t. New York: Oxford University Press.

8. Collier, Paul. 2009. Wars, Guns, and Votes: Democracy in Dangerous Places. Harper Collins Publishers.

9. Davies, Martyn, Hannah Edinger, Nastasya Tay and Sanusha Naidu. 200a. How China delivers development assistance to Africa, Centre for Chinese Studies, University of Stellenbosch.

10. Dollar, David. 2008. Lessons from China for Africa, World Bank Policy Research Working Paper 4531.

11. Doucouliagos, Chris, and Martin Paldam. 2009. "The Aid Effectiveness Literature: the Sad Results of 40 Years of Research". Journal of Economic Surveys, 23(3):433-461.

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　　The International Poverty Reduction Center in China (IPRCC) was jointly initiated and established by the Chinese government, the United Nations Development Programme (UNDP) and other international organizations in May 2005. The IPRCC is designed to provide a platform for knowledge sharing, information exchange and international collaboration in the areas of poverty reduction and development.

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